Thomas Bulkowski’s successful investment activities allowed him to retire at age 36. He is an internationally known author and trader with 30+ years of stock market experience and widely regarded as a leading expert on chart patterns. He may be reached at

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Simple ABC Correction Identification Guidelines

See the above chart. Point D must be below point C, meaning
that the measured move down (MMD: EABC) must not correct too far. MMDs that correct too far fail more often.

Corrective phase

The corrective phase of the large MMU is an MMD, like the
ABC pattern shown in the above chart. Only one MMD should be present with two straight-line runs, EA and BC. Discard patterns
with pronounced turning points within those two down legs.

Points

Within the MMD, points A, B, and C are below E. Be especially
careful that B not be above E. Point C starts a major price up swing.

Simple ABC Correction Trading Tips

Reference the figure on the right.

Trading Tactic

Explanation

Trendline

Draw a trendline from E to B and extend it downward. When
price closes above the trendline, buy.

Swingers

For aggressive traders, draw a trendline down from B along
the tops and buy when price closes above it. A close above the intraday high at A (blue trendline)
also works as a buy signal.

Buy

For conservative investors, a close above B or even E is
the buy signal.

Reverse

Be prepared for price to reverse at the price of E – 36% do and
prices drop, confirming a double top.

Simple ABC Correction Example

The above figure shows an example of a simple ABC correction chart pattern. Point A
begins the chart pattern, B is the middle turning point, and C
completes the pattern. Another simple ABC correction occurs at points 1, 2 and 3.